Buying a home is one of the biggest decisions you will ever make. It is most likely the largest debt you will ever have and there is a lot that goes into your home buying decision. There is also a lot of excitement and anticipation in home buying; with all of this going on it is no surprise that there are some common mistakes that prospective buyers can run into. Some of these mistakes will not only cause headaches for you but can cost you a lot of money in the long run. There are ways to avoid these common mortgage mistakes and make the home buying process much more enjoyable.
The first common mistake many home buyers make is not doing their homework. Before you can buy a home, you need to know your credit score. One benefit of doing this is you can clean up your credit in advance which will help you qualify for a better loan. You should also avoid applying for additional new credit. Applying for a new credit card will cause your credit score to temporarily lower, which will also affect the loan you qualify for. If you see anything strange on your credit check you will have ample time to correct or dispute anything before you begin the loan prequalification process and you will be approved for a better loan. The lenders will be thoroughly examining your credit so you should be very familiar with it too.
Once you have gotten your credit in order and know your credit score, you will go about getting pre-qualified for a home loan. Even better than getting a pre-qualification is getting pre-approved for a home loan. Pre-approval is when a lender looks at your credit history, employment history, assets and debt to income ratio. Being pre-approved will make it even easier to purchase your home. When getting pre-approved, a big mistake that people make is not getting their interest rate locked in. A verbal rate lock is not enough. You must have your interest rate locked in, in writing. A written agreement will state what the rate is and how long it will be locked in for. Rates change often and home buying can take some time. Having your interest rate locked in can save you heartache and money in the long run.
Lastly, once you have checked your credit and been pre-approved for a loan, you need to consider how much you want to spend each month on your mortgage payment. You will want to make sure not to over-extend yourself or take on a bigger payment than you can afford. Just because you have been pre-approved for a certain amount does not mean that is how much you should spend. Carefully consider your payment as well as insurance, property taxes, utilities, and your lifestyle when deciding how much to spend on a home. By avoiding these common mistakes, home buying can be a great experience and you could soon be living in your dream home.